Tax Protester Embroiled in 10-Year War With the IRS

Each April, Eugene Shafer dutifully submits his tax returns. But he doesn't fill in any of the blanks.

The Fifth Amendment, he claims, protects his privacy. The Internal Revenue Service, he says, has no legal right to know how much money he makes or how he spends it.

So for the last 10 years, the 69-year-old Hollywood bookkeeper has refused to disclose his income and hasn't paid a cent in taxes. The IRS says he has been hiding income, or at least not writing it down on his returns, and owes almost $200,000 in back taxes.

Arguments of Constitutional protection are nothing new to the IRS. Neither are tax protesters.

But Shafer is not a member of any of the publicized organizations that oppose taxation, and government officials say it is unusual that this solitary, elderly businessman has gone so long without paying.

'I'm Mad' at IRS

"I'm not doing this because I owe them anything. I'm doing this because I'm mad," Shafer said. "Most people are afraid when they hear the word 'IRS.' They cringe. Somebody has to stand up to the IRS."

The bespectacled businessman with fiery red hair says he has forsaken his livelihood to fight injustice. His clothes are old and plain. His aged Ford broke down last winter, so he takes the bus. Shafer says he hasn't earned the kind of money that would warrant $200,000 in taxes.

It is impossible to verify his financial status--IRS records are confidential and officials say they cannot comment on Shafer's case.

Nevertheless, it is clear that Shafer's quixotic battle has become an obsession. He has spent endless hours researching the Constitution and tax law. He has hired attorneys to help him when he could afford to, and he has prepared his own legal documents when he could not. Representing himself in court last month, he won an order that temporarily blocked the government's efforts to assess back taxes.

By contrast, Shafer's bookkeeping service, which once had 15 workers and three offices, has dwindled to three people working in a cubicle-sized room, he said.

Struggle Near End

"Everything I have has gone into this," he said.

Now Shafer's struggle may be close to an end. A U. S. District Court judge last week threw out Shafer's primary line of defense, according to Assistant U. S. Atty. Edward M. Robbins Jr. The IRS can begin actions to collect its money.

"When you are a taxpayer and you've got an assessment out on you, the IRS is lawfully empowered to seize and sell all your property until it gets enough to pay the tax liability," said Robbins, who handled the case against Shafer. "That means all your property--your car, your house."

As Shafer describes it, his battle began in the late 1960s. The New York native, who moved to California after serving here in the military, scored a number of successes in the stock market and happily paid his taxes. Soon after, a string of bad investments left him penniless.

At that time, the IRS audited Shafer. Shafer cleared the audit but became enraged at the government's tax policies.

"That set me off, and from there on I started investigating what rights a taxpayer does have," Shafer said.

Reading books and attending lectures, Shafer slowly formed his current theory on taxes:

Income tax, he claims, is a voluntary self-assessment. The law requires only that taxpayers file their returns truthfully. Because lying on a tax return is perjury, the return carries the same status, rights and obligations as a court appearance.

Similar to Court Witness

Thus, the taxpayer is allowed rights similar to those of a witness in court. Shafer has chosen to take the Fifth Amendment, which protects individuals from being forced to give possibly self-incriminating evidence.

"Could you hope to have a realistic chance of evading taxes by using that argument? The answer is no," said Joe Bankman, a professor of tax law at USC. "It may have some merit on the surface. But it is a losing argument."

Robbins, of the U.S. attorney's office, went as far as calling Shafer's argument "totally frivolous."

The IRS is trying to collect for the years 1977-83. Deprived of any information from Shafer, the agency has estimated Shafer's income and declared in court documents that he owes $197,819.13 in taxes.

With IRS officials remaining silent on Shafer's case, it is impossible to determine why it has taken the IRS 10 years to get to the point where it may collect. Shafer says the agency has spent these years harassing him and trying to put him in jail on criminal tax charges.

"When it involves tax protesters, we cannot tell our side of the story," said an IRS spokeswoman. "Very often, people make any number of statements knowing full well that the laws prohibit us from responding."

Until last week, Shafer had held the IRS at bay by claiming that the agency did not give proper notice that he owed back taxes. However, the judge ruled that the IRS had given notice, Robbins said. Shafer said he will consider appealing the court's decision.